The Top 5 Issues in LCFVs This Week: Americans Are “Frustrated” with Fossil Fuels

Happy Thursday friends! Here’s my weekly take on the five most interesting developments in LCFV trends over the last week.

There’s bipartisan support among Americans for renewable energy and a growing “frustration” with fossil fuels a Pew Research study found this week but I contrast this with reality: we’re driving more than ever on those very same fuels.

The Global Commission on the Economy and Climate in a report said US$90 trillion is needed to develop sustainable infrastructure and a lot of that will need to go to energy and transport. Among other things, the Commission recommended the prioritization of policies to support low-emission transport in cities.

The Paris Agreement will now enter into force in within the next 30 days with India’s and now the EU’s ratification. To reduce GHGs from transport, these countries are going to rely in the next few years on two key strategies: biofuels and implementing tougher fuel economy standards.

The Canadian government proposed a carbon pricing policy this week. Meantime, the think tank Ecofiscal called for scrapping Canada’s biofuels program for, among other measures, the aforementioned policy and a low carbon fuels standard or zero emission vehicle program.

Did you know diesel for passenger cars isn’t dead? Nope, it’s not. Not yet. So said Renault CEO Carlos Ghosn last week at the Paris Auto show.

A Pew Research study, covered in Forbes this week, found among other things, that there is bipartisan public support for renewable energy (shown in the figure below), while “frustration is mounting” with fossil fuels according to Forbes.

I note that the Pew study doesn’t state that there is frustration – that’s a Forbes interpretation. Pew notes:

While there are substantial party and ideological divides over increasing fossil fuel and nuclear energy sources, strong majorities of all political groups support more solar and wind production.

There may be a growing frustration with fossil fuels, but that has not moved consumer behavior away from them. Consider the following chart showing average fuel economy through September 2016 (left) and gasoline consumption through August 2016 (right).

That contrasts with the trend many advocates want to see, which is to massively increase the penetration of electric vehicles (EVs) in the fleet in the coming years. Bloomberg New Energy finance projects EVs will represent 35% of global light-duty vehicle sales by 2040 or about 41 million vehicles. This week, the U.S. Department of Energy’s projected that by 2025, full zero emission vehicles (ZEVs) and transitional ZEVs (e.g. plug-in hybrids) will make up 6% of light-duty vehicle sales and about 2% of the total light-duty vehicle stock.

And this growth will be driven, not surprisingly, by California’s ZEV program.

Reuters this week highlighted a study from the Global Commission on the Economy and Climate that estimated US$90 trillion will need to be invested in sustainable infrastructure to help countries meet Paris Agreement targets. But money alone isn’t going to do it, according to the Commission, chaired by former Mexican President Felipe Calderon. “Fundamental price distortions” such as subsidies for oil and fuels need to be ended, policy frameworks need to be strengthened, the financial system needs to be transformed to tackle these issues and a major ramp up in clean energy R&D is required.

The Commission notes that globally, at least 60% of infrastructure investment over the next 15 years will be made in the energy and transport sectors. To transform the energy sector, it is investments in oil, coal and gas must decrease by about one-third by 2030, while investments in renewables and in energy efficiency must increase by at least a similar proportion to keep global average temperature rise below 2°C. This is shown in the figure below.

The Commission noted in the study:

“The economic case for investing in clean energy is fast becoming clear, with the costs of renewable energy falling to levels that are increasingly out-competing fossil fuels, and with an increased awareness of the benefits of energy efficiency improvements. This case is particularly clear when we consider the health and economic costs to society of the roughly 4 million premature deaths that occur each year due to fossil fuel-related air pollution. Despite this, coal power capacity equivalent to about 1,500 plants is planned or under construction worldwide today.

Close to US$1 trillion worth of current energy assets are at risk of being stranded if markets fail to anticipate the transition to a low-carbon economy. Coal has the largest negative impacts on human health through the pollution that it causes, yet it receives significant tax breaks in most countries, and its export and development internationally continues to be supported by a number of governments. Given these challenges, the development of dedicated energy transition plans can dramatically accelerate the shift to a clean energy mix, in a way that delivers clean and resilient energy access. A wide range of stakeholders need to be engaged in formulating national and industrial plans to ensure a just transition for all those affected, as noted above.”

With respect to energy and transport, the Commission recommended:

All countries to develop transition plans to accelerate a scale-up of clean and resilient energy solutions and a phase-out of coal, in a way that delivers fully on energy access goals and facilitates a just transition for workers.

Cities to commit to developing and implementing low-carbon urban development strategies by 2020, prioritizing policies and investments in public, non-motorized and low-emission transport, building effi­ciency, renewable energy and efficient waste management.

Governments and the private sector to scale up innovation in key low-carbon and climate-resilient technologies, tripling public investment in clean energy R&D and removing barriers to entrepreneurship and creativity.

A carbon price is needed “as a necessary condition for inclusive and low-carbon growth, in line with the Paris Agreement.” Current pricing schemes collectively cover only about 12% of global GHG emissions.

With respect to subsidies and price distortions for fuels, diesel was singled out:

“An example of misalignment in tax policy is the difference between tax rates on diesel and gasoline for road use in many countries. As compared to gasoline, diesel emits higher levels per litre of harmful local air pollutants such as nitrogen oxide, sulphur dioxide and particulate matter, as well as carbon dioxide. This implies that the level of tax for a litre of diesel should be higher than that for a litre of gasoline, to reflect relative environmental costs.

Yet OECD analysis shows that diesel fuel is taxed at lower rates than gasoline, both in terms of energy and carbon content, in all but one of 34 OECD countries: the US. This difference is not justifiable from a human health, environmental or economic perspective. Indeed, diesel air pollution kills more people in France each year than road accidents. Diesel vehicles are often more fuel-efficient, but this means that social costs such as congestion, noise, accidents and infrastructure wear are higher per litre than for gasoline.

In urban areas, the health effects of high penetration of diesel vehicles are particularly harmful. The benefits of reducing the health burden from diesel fuel in urban areas use suggest an urgent need for governments to revisit regulations and policies in place for diesel vehicles, including those policies in OECD countries that favour diesel vehicles.”

This week both India and the EU ratified the Paris Agreement, which means it will now enter into force in the next 30 days, having surpassed the threshold of 55 countries representing 55% of global GHG emissions as the figure below shows. Read more about it, and what it means for LCFVs, especially biofuels.

Speaking of carbon pricing, the Canadian government this proposed to implement carbon pricing nationwide by 2018. Under the proposed pan-Canadian approach, provinces and territories will have the flexibility to choose between two systems: a direct price on carbon pollution or a cap-and-trade system. The price on carbon pollution was proposed to start at a minimum of $10 per ton in 2018 and rise by $10 a year to reach $50 per ton in 2022. Revenues raised remain with the provinces and territories and they will decide how to reinvest that money in their economies.

The plan was widely reported this week. But what caught my eye was a statement in a report from the think tank Ecofiscal Canada calling for a rethink on the country’s biofuels policies. To complement the carbon pricing scheme, the group called for a low carbon fuels standard and/or a ZEV program. The group noted:

“By itself, a pan-Canadian price on carbon may not be enough to meet Canada’s emissions-reduction targets. Market failures can inhibit the development of low-carbon technologies. To make the shift to low-carbon transportation, complementary policies may be required in the short term, such as low-carbon fuel standards or zero-emission vehicle standards. In addition, governments should continue to fund research and development of low-carbon transportation technologies.”

Perhaps countering a recent report from a Renault executive that the future for diesel looked “dim,” (VW’s CEO made a similar comment in June) Renault-Nissan CEO Carlos Ghosn last week told the AP at the Paris Auto Show, “Without any doubt we will continue to develop diesel,” particularly for SUVs and other high-range cars. But he admitted that Dieselgate and the tightening of emissions standards in Europe are a “boon” to the company’s bet on electric cars.

A June study by AlixPartners LLP, a consulting firm, predicts diesel car sales in Europe will fall to 9% by 2030 as electric vehicles and hybrids become more affordable. Meantime, in the U.S., The Wall Street Journal reported that GM is actually adding diesel vehicles to its lineup in part to help meet fuel economy standards. Perhaps diesel for passenger cars may be on life support, but it’s not dead yet.

“Honorable mention” this week: IEA Bioenergy Countries’ Report on the status and implementation of bioenergy policies for 22 countries plus the European Union. Good overview and data for these countries that may be of benefit in your work.